Varun Beverages has the right ingredients in place, but keep an eye on margins

Varun Beverages Ltd – one of the largest PepsiCo franchisees outside the US – appears to have all the right ingredients in place. Besides expanding existing plants, VBL also plans to set up new ones, which would further boost earnings. “We believe that going ahead, VBL will tap into the snack food market by targeting regions where PepsiCo lacks manufacturing facilities and relies on imports," analysts at Motilal Oswal Financial Services wrote in a report on 14 March. “VBL has undertaken a lot of initiatives, which will eventually play out in the long run and aid earnings growth," said Preeyam Tolia, an analyst at Axis Securities.